Is the economy on the road to recovery or is someone blowing smoke in your eyes.

My advice, cover your eyes.

The unemployment numbers are up again – that is right – up. The rate of increase has slowed, however, unemployment is still increasing. We have had 8 straight weeks of 600,000+ in unemployment claims. This weeks numbers are slightly smaller than last weeks numbers – but we are still adding huge numbers of newly unemployed. Compared to this week last year, twice as many people filed for unemployment claims this year.

“Single-family sector actually stabilized in March at an annual rate of 358,000 units, the same as February. Two months of stability could signal that single-family home building is finding a bottom although at a very low level, analysts said.”

Ok, 358,000 units. Three years ago this headline was in the news, “Housing Starts Peak Again in February”, “Total housing starts increased by 0.5 percent to a seasonally adjusted annual rate of 2,195,000 million units, setting a new 21-year-record for the second month in a row, the U.S. Commerce Department reported. The February construction pace was 15.8 percent above a year ago.” http://grounds-mag.com/news/housing_february_041205/

385,000 versus 2,195,000. Looks like we have a long way to go.

Things have leveled off OK, at all time low levels. I guess you can read optimism into those numbers, but, even if the current number of starts are doubled, we would only be building 1/4 of the number of houses that were built 3 years ago.

Don’t be fooled by earnings reports from Wells Fargo and Goldman Sachs, both received Billions in bailout dollars. Both have been allowed to restate the value of “toxic mortages” they have on their books with the recent change in accounting rules.

What do the J.P. Morgan numbers mean? Who knows? With a change in the accounting rules, they could mean anything, or nothing. What is the banks “real” exposure to nonperforming consumer mortgages and credit card debt? How large will the future write downs need to be?

As for the economy. By the numbers, the elevator is still on the way down, but the rate of descent maybe slowing. Unemployment has already surpassed 9% and the Obama Administration projected it would not pass 8.9%. Economists are now projecting an unemployment rate of 11% before winter 2009.